Ethos, the Swiss Partner of ECGS welcomes the revision of the Swiss Code of Best Practice for Corporate Governance but points out an ambivalent project

The Ethos Foundation commended the decision to carry out a revision of the Swiss Code of best practice for corporate governance. In the current Code dating back to 2002 (with an appendix added in 2007), several points do not reflect international best practice anymore.

An ambivalent project

In general, Ethos is satisfied that the «Comply or explain» principle was introduced in the new version of the Code. This principle is now established in most codes of best practice abroad. Another positive amendment to the Code is the stipulation that the board of directors should pursue the sustainable development of the company.

It is however regrettable that the new version of the Code neither makes mention of the principle of equality of treatment of shareholders (a single class of shares), nor of the “one share one vote” principle (no registration or voting rights limit). These concepts are recognized as fundamental in all international best practice documents.

Numerous exceptions to best practice allowed

Following detailed analysis of the articles of the new Code project, Ethos regrets that several exceptions remain possible (see Ethos' response to the consultation). In particular, point 27 of the project stipulates that the rules of the Code of best practice can be adapted to small or medium sized companies. This concerns approx.180 out of 200 companies included in the SPI index. By allowing these companies to fix other governance rules (e.g renouncing the establishment of key board committees) the Code becomes practically meaningless for 90% of the targeted companies.

Regarding the external auditor (point 28), the project leaves a broad margin to the external auditor firm when ensuring its independence and organization. The code should, on the contrary, promote the alignment with the new EU regulation issued on 27 May 2014. Ethos is of the opinion that audit firms should respect at least the following two rules:

- Non audit fees shall not exceed audit fees.

- The maximum mandate length should not exceed 7 years for the lead auditor and 20 years for the audit firm respectively.

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